Cultured mouse fibroblasts which are malignantly transformed or treated with TPA or growth factors such as PDGF synthesize and secrete a 39,000 Mr-phos-phoglycoprotein (major excreted protein, MEP) in large amounts. The purified protein contains mannose 6-phosphate, the lysosomal recognition marker. It is processed intracellularly in both transformed and nontransformed cells to give two specific lower molecular weight forms with a lysosomal localization. The secreted form of MEP is the precursor to a lower molecular weight novel thiol protease (cathepsin) with an acid pH optimum capable of hydrolyzing a wide variety of proteins including the extracellular matrix proteins collagen, fibronectin and laminin. The specificity of peptide bond cleavage and the profile of inhibition of MEP is the same as cathepsin L. Sequence analysis indicates that mouse MEP and its human homolog represent precursors to cathespin L. Overproduction of cloned mouse or human MEP/cathespin L in a nontransformed cell results in secretion of this lysosomal enzyme. Secreted MEP can bind to the mannose 6-phosphate receptor of many cells and be endocytosed and processed intracellularly. In antigen presenting cells, MEP uptake reduces the efficiency of antigen presentation, thereby interfering with immune response. Transformation, TPA and PDGF stimulate MEP synthesis by increasing levels of MEP specific mRNA transcription. We have cloned a functional MEP gene from the mouse and have identified the 5' flanking region presumed to contain the MEP promoter. We are studying this system as a model of regulation of lysosomal protease synthesis, processing and secretion and how malignantly transformed cells perturb normal host functions.